Saudi Arabian VAT Rates 2023

Value Added Tax (VAT) was introduced in the Kingdom of Saudi Arabia (KSA) in January 2018. At the time of introduction, the basic rate of VAT applied on taxable supplies and imports in KSA was 5%. A decree was issued dated 11th May 2020 clarifying the change in VAT rates and transitional rules for VAT rate change which will decide the tax liability given taxable supplies and some other special cases.

What is the basic VAT rate in KSA?

The basic VAT rate was 5% when VAT was introduced in 2018.

What is the current VAT rate in KSA?

Zakat, Tax and Customs Authority (ZATCA) revised the VAT rate to 15% w.e.f 1st July 2020 to counter the economic and financial impact of the COVID pandemic.

List of supplies on which 0% VAT is charged

To qualify supply for zero rates, the supplier should be registered for VAT in KSA. Also, goods and services should be supplied in lieu of any monetary or non-monetary consideration.

Below is the list of supplies on which 0% VAT is charged:

• Exports of goods
• Services supplied to non-GCC residents
• International goods and passenger transport services
• Supply of Qualifying means of transport
• Qualifying medicines and qualifying Medical Goods
• The first supply, or supply for investment, of Qualifying Metals (gold, silver or platinum)

What are exempt supplies under KSA VAT?

Exempt supplies fall outside the scope of KSA VAT law and do not attract VAT. Businesses dealing with exempt supplies neither collect VAT on sales nor claim input VAT paid on purchases. Below are the exempted supplies under KSA VAT:

• Financial services with nominal margin as consideration
• Rental services for qualifying residential real estate 
• Issue or transfer of equity or debt security
• Issue of life insurance policy

Transitional provisions for charging 15% VAT

Due to the revision of tax rates in KSA, there were high chances of ambiguity regarding accurate tax rates for the particular contracts and tax invoices issued before 11th May and completed in the transitional period or after completion. Therefore, ZATCA issued transitional provisions to avoid any misuse of dates relating to the calculation of tax.

Below are some special cases mentioned in transitional provisions:

Contracts signed with government entities

Before 11th May 2020	5% VAT will apply until the date of: – Expiration, – Renewal, – 30th June 2021 (which is earlier)
Between 11th May 2020 and 30th June 2020	For supplies made before 1st July 2020 – 5% VAT For supplies made on or after 1st July 2020 – 15% VAT

Contracts signed between VAT-registered persons

Before 11th May 2020	5% rate will apply until the date of: – Expiration, – Renewal, – 30th June 2021 (whichever is earlier)
Between 11th May 2020 and 30th June 2020	For supplies made before 1st July 2020 – 5% VAT For supplies made on or after 1st July 2020 – 15% VAT
Contracts signed before 11th May 2020 and supply will continue on or after 1st July 2020	5% rate will apply until the date of: – Expiration, – Renewal, – 30th June 2021 (whichever is earlier)

Tax invoices

Tax invoice issued before 11th May 2020	If actual supplies take place between 1st July 2020 and June 2021- 5% rate
Tax invoice issued between 11th May 2020 and 30th June 2020	Supply made on or before 30th June 2020- 5% rate Supplies taking place on or after 1st July 2020 –  15% rate
For periodic tax invoices issued on continuous supplies issued before 11th May 2020	Part of supply completed before 1st July 2020 – 5% rate Supply taking place after 1st July 2020- 15% rate

List of goods and services on which 15% VAT is charged

All goods and services except exempt supplies and zero-rated supplies are subject to 15% VAT.

KSA VAT rate on imports and exports

Goods imported into the KSA on or after 1st July 2020 are subject to15% rate. However, the rate was 5% before the amendment of VAT rates in KSA.

Exports of goods and services outside the council territory are deemed zero-rated supplies, i.e. tax is charged at a 0% rate. Also, the business is allowed to recover the associated input VAT by provisions of VAT.

FAQs

What is the VAT rate in Saudi Arabia?

The current VAT rate in Saudi Arabia is 15%.

Is the VAT rate increased in Saudi Arabia?

When ZATCA introduced VAT in Saudi, the VAT rate was 5%. However, the government increased the VAT rate to 15% w.e.f. 1st July 2020 to combat the financial impact of the COVID pandemic.

What is the VAT rate on gold in Saudi Arabia?

Gold with a 99% purity level falls under zero-rated supply, whereas gold with a lower purity level attracts the standard rate of 15%.

Is VAT applicable on salary in KSA?

ZATCA clarified that VAT is an indirect tax imposed on the supply of goods and services only. Hence, VAT does not apply to salaries, wages and bonuses.